Saturday, February 28, 2009

“The Supreme Court on Friday issued notice to the Centre on a PIL, which saidthat the purpose for which right to property was relegated to a mere statutory right in the late 1970s is no longer relevant.

The PIL seeking restoration of the right to property in the third chapter of the Constitution, which enumerates the fundamental rights enjoyed by every citizen, argued that it was made a statutory right in 1978 to abolish large land holdings with zamindars and rich and their distribution among landless peasants.

The Bench issued notice to the Union law ministry seeking its response to the PIL, which challenged the constitutional validity of the 44th Constitutional Amendment, 1978, on the ground that it was violative of the basic structure of the Constitution.

The petition, filed through advocate Gopal Shankaranarayanan, stated that in the recent past acquisition of agricultural land depriving poor farmers of their only means of livelihood has given credence to the necessity for a fresh debate on making right to property as a fundamental right again.

Though the 1978 constitutional amendment was to permit government to acquire land for public purpose without being dragged to courts by big zamindars, the alteration of the status of the right to property never intended to harm small landholders, the petition stated”.

Friday, February 27, 2009

LAVEESH BHANDARI who co-authored this report on West Bengalsays “When every parameter shows a relative decline, when the malaise is overarching, when accounts of government-run firms are not completed for many decades (yes, decades!)”,

“What is truly extraordinary is that the one thing that the government, as the largest buyer of goods and services can and must do, it is not doing. That is to place orders for steel, cement, computers, software, trucks, cars — you name it. Just fill the order books, if necessary with a proviso for later delivery, and see how the mood changes.

It is puzzling why this simple solution can’t be implemented. Instead of all this grandstanding, all that the different ministries had and have to do is to just get on with buying whatever they were going to buy this year and next year”.

This kind thinking has already implemented in the six pay commission by embossing the informal sector where the majority of people dwells.

Just is the growth rate of different sector in the Q3 (October-December) 2008-09. The manufacturing and agriculture and allied sectors were shown negative growth but the community, social, and personal services were shown as high as 17.3%!

Of course, people who are in the formal sector will defiantly do “orders for steel, cement, computers, software, trucks, cars”…..etc.

There is a news on new report by two Indian economists at Indicus Analytics which state that:

“In the early 1960s, West Bengal was one of the more successful states in India. What happened since the 1960s. One answer is the Left Front government and its policies. Even in instances of central schemes like NREGA and RTI, the delivery mechanism is not there at all,” Mr Debroy said releasing the report. The Left has been claiming NREGA was an outcome of its pressure on the UPA. West Bengal’s per capita GDP was Rs 29,457 which made it 18th in the country, he said.

In 2005-06, only 27.9% of West Bengal’s households had access to safe drinking water. In Maharashtra, this figure was 78.4% and in Tamil Nadu 84.2%. “In a state often called the intellectual capital of India, the school dropout rate was 78.03%... Only Bihar, Nagaland, Meghalaya and Sikkim fare worse,” it said.

While for India, 10.1% of households were rich, 54% middle class and 35.9% poor, for West Bengal 5.6% were rich, 41% middle class and 53.4% poor. This time, the finger will have to point inwards. The report quoted NSS data to say that in 2004-05, 47.3% of Bengal’s poor had no subsidy card while 43.3% of non-poor had BPL or Antyodya Anna Yojana cards. “This doesn’t say much about a government that is supposed to work in the name of the poor,” the report said.

Thursday, February 26, 2009

On 12 February 2009 Mr Shankar Acharyawrote a article in the Business Standard saying “In the field of financial economics I can think of no other Asian who combines serious policy experience with academic rigour so effectively”. Yes he praised Andrew Sheng who delivered Third K B Lall Memorial Lectureon “From Asian to Global Financial Crisis” at ICRIER in Delhi recently.

The lecture has almost all usual citing and verbatim etc. at least what was interesting to me was his concluding part as Sheng writes “The three key functions of financial sector are to protect property rights, reduce transaction costs and have high transparency. These are Western concepts that were not understood well within the Asian experience”.

Fox once smelled my body as I was sleeping in our farming when I was a ten year boy. However I was terrible scared but we had a great dog named ‘Johnny’ to save me from that bad smell? But what is relevant today yes there is a point.

Liking and disliking certain things become a kind of institution to act with time if one is mature to listen, learn and live with it. This comes to my mind when I was reading an interview which is more like bubble bust in expert thinking forget the processing of thinking. See below:

“Ironically, the more famous the expert, the less accurate his or her predictions tended to be.

What makes some forecasters better than others?

The most important factor was not how much education or experience the experts had but how they thought. You know the famous line that [philosopher] Isaiah Berlin borrowed from a Greek poet, "The fox knows many things, but the hedgehog knows one big thing"? The better forecasters were like Berlin's foxes: self-critical, eclectic thinkers who were willing to update their beliefs when faced with contrary evidence, were doubtful of grand schemes and were rather modest about their predictive ability. The less successful forecasters were like hedgehogs: They tended to have one big, beautiful idea that they loved to stretch, sometimes to the breaking point. They tended to be articulate and very persuasive as to why their idea explained everything. The media often love hedgehogs.

How can we nonexperts test our own hunches?

Listen to yourself talk to yourself. If you're being swept away with enthusiasm for some particular course of action, take a deep breath and ask: Can I see anything wrong with this? And if you can't, start worrying; you are about to go over a cliff.”

Before this interview I was of course reading an another experts interview who is the only hero in Tamil Nadu perhaps in India with honest if the law degree with which he attempts for making comments!

Just see one comment (though it was in 2005):

“So, the time is right but the person over there is wrong again. By wrong person, I mean Sonia Gandhi [Images], who is the real authority, the real power. So, there is a wrong person there. One can rest assured that it will be wrongly administrated. I will not welcome an Emergency if this government imposes it. But if a person like Vajpayee or Advani, real nationalists- not necessarily them but someone like them- does it at some point of time, I will welcome it. That's my present mood. I want to be honest when I give my opinion”.

At least folks now realised that they can not fool poor people anymore by taxing lavishly. See what VijayKelkarsays:

“Consumers pay the tax on final goods and services purchased. In terms of the national economic identity, therefore, a tax is levied on that part of value added which is consumed. Exports are “zero-rated’ as in competitive international markets you cannot export taxes!

One of the most important factors adversely affecting our competitiveness is the present indirect tax system.

High import tariffs, excises and turnover tax on domestic goods and services have enormous cascading effects, leading to a distorted structure of production, consumption and exports.

The existing tax system introduces myriad distortions which favour some goods and services at the expense of others. Manufacturing sector is so highly taxed that India is an outlier in terms of taxation”.

In the Globalpost Shailaja Neelakantanwrites“India has become a philanthropist nation, rather than a poor supplicant looking for handouts”.

And further she asks and it is relevant:

“a few dissident voices have begun to ask why so much Indian money was being pumped into the U.S. higher education system when India's own is in far more desperate need of cash. "It is strange that they are not doing it in India," said Sam Pitroda, chairman of theNational Knowledge Commission, an advisory body that is looking into higher education reform here”.

In fact it is true that:

“the Tata family has contributed a lot to Indian higher education. Several higher education institutions were started with the help of the Sir Dorabji Tata Trust that was established in 1932. The private, top-ranked IndianSchool of Business in southern India has also received generous contributions from Indians here and abroad. And the renowned Indian Institutes of Technology — the biggest beneficiaries — have received millions of dollars from their graduates living here and in the U.S., including from Nilekani.

But the impact of this philanthropy has been limited because it has directed funds to institutions that already operate at an elite level. Graduates like giving to the technology institutes because they have more autonomy than other public institutions in India, and therefore have more control — with more openness — over how donations are spent. Fundraising experts and some Indian donors who give to their American alma maters say prospective donors here believe that any money given to a typical public university in India would be frittered away — because the entire higher education system in India is poorly managed — or siphoned off by corrupt officials”.

Wednesday, February 25, 2009

As today’s TOI editorial report that the “The Supreme Court has now decided that the right to cast a negative vote should be taken up by a five-judge constitution bench. While delivering a judgment on a PIL, a two-judge bench felt the matter was important enough to be heard by a constitution bench. This is welcome.

The Election Commission has already given its support to the demand for a negative vote. It has asked for an amendment to existing laws to enable a voter to "reject all the candidates, if he chooses to do", while maintaining secrecy of the ballot. This would mean putting a `None of the above' option in electronic voting machines, which shouldn't be too difficult. Unsurprisingly, most political parties are against this move. But if the right to cast negative votes can shake up political parties and make them nominate better candidates, it would have served its purpose”.

But it may be sad that the Delhi based Liberty Institute reject this move. In fact it feels this move will “plague our democratic system”.

In fact in this case there is a NGO in Tamil Nadu whose single objective is “Oh Podu” (“cast the vote”).

If any one say that the “conversions have created resentment and social disharmony in their wake” in Indian society. Perhaps it is true in the case of Tamil Nadu and Andhra Pradesh. Take “the Foreign Contribution (Regulation) Act (FCRA), available on the website of the Union Home Ministry. During 2005-06, Rs 7,877 crore was received by way of foreign donations to various NGOs, up from Rs 5,105 crore in 2003-04. Tamil Nadu (Rs 1,610 crore) and Andhra Pradesh (Rs 1,011 crore) were among the highest recipients. The highest foreign donors were Gospel Fellowship Trust USA (Rs 229 crore), Gospel for Asia (Rs 137 crore), Foundation Vincent E Ferrer, Spain (Rs 104.23 crores) and Christian Aid, UK (Rs 80.16 crores). The largest recipients wereWorldVision (Rs 256 crore), CaritasIndia(Rs 193 crore), Rural Development Trust Andhra Pradesh (Rs 127 crore), Churches Auxiliary for Social Action (Rs. 95.88 crores) and Gospel For Asia (Rs. 58.29 crore). The funds received by some of these organisations have trebled or quadrupled in just three years since the formation of the UPA Government.

If the official Christian population in India is barely 3 per cent, why do Christian NGOs receive the largest share of foreign funds? From Christian organisations that are known to support evangelism in many Asian countries?

In my travels in Karnataka, my home state, I have seen significant conversions to Christianity having taken place in recent years wherever World Vision and other foreign-funded NGOs started their charitable activities. Kannada newspapers in the past few weeks have carried graphic accounts of how proselytisation is packaged with charity, especially targeting vulnerable sections of society” (Sudheendra Kulkarni“Conversations with foreign-funded charity”).

In fact is true that Tamil Nadu (5139) and Andhra Pradesh (4768) have highest number of “associations registered under the Foreign Contribution (Regulation) Act, 1976”.

These sectors have not been reformed and there is no reason why it has not both officially and privately. In fact it is nonsense that the governments never gave thought but the often cited Constitution of India gives somehow fair role to ensure basic right to trade among people.

Of course, one may ask what the whole private sector role in reforming these sectors?

One answer may these sectors are very small no milliners or billionaires so no firefight. But that is not true. The same red tape “sims” is prevailing in these sector for long time.

I have been time and again widely experienced (personal interaction while in works) with these sectors across cites in India-Chennai, Delhi, Indore, Chandigarh, etc.

Whether any argument is true or not often economists and experts try to escape by claiming two routes one is blaming politicians and the other one is government institutional system. But it is like wounded people try to look for first-aid. Simply that is the situation of government institutions and the politicians around the world. Of course there are others who look at things in radical way. But how these wounded are managing their role in the debate is altogether different issue. It is almost a mess now in the debate of who created world financial crisis, and every one will agree it is the US but how it has created? Different pundits look at it in different way. Some are here:

“Political measures to subsidise ownership and discourage renting have contributed to terrible lending and borrowing practices that caused the current crisis. Instead of reforming these, the Obama Plan provides billions to subsidise those same terrible practices”.

“Obama is planning to enlarge. Walker also warned that the crisis could not be solved by growing out of the problem, eliminating earmarks, wiping out fraud, ending the Iraq war or cutting defence expenditures, restraining discretionary spending or letting the Bush tax cuts expire (US, GAO-07-389T, p.18). These are the very policies that Obama is hoping will reverse exploding future deficits. With projected reductions in military spending, it seems likely that the US, like its Roman predecessor, will find it difficult to maintain the sinews of the forces that have held the global order together. With no obvious alternative to provide this global public good, I fear the ensuing erosion of the global order, which is so essential for the processes of globalization to work, is likely to be the most serious long-term consequence of the global financial crisis.”

“It is obvious that we are reposing too much faith in governments. Because we are convinced that markets have failed, we assume that talking heads know better. They don’t. They just talk louder. As a result of flawed government actions, what was a liquidity problem has now become a solvency crisis with secondary and tertiary effects. In 2007-08 the size of bank insolvency kept increasing as governments fumbled. It has exploded as government actions turned what started out as an American financial crisis into a global economic crisis. Government failure has converted what might have been a short recession into a long depression. The assumption that, when markets and banks fail, governments will automatically succeed, is wrong. Evidence suggests that governments have failed even more; because of the nature of political (and legislative approval) processes, bureaucracy, inefficiency, and compromised delivery that is endemic in governments, more than in the private sector! What’s the evidence?”

In the current scenario the public choice theorist are seems to be balanced but Mr Mistry says it does not “The fantastic sums mounting in the black hole of bank balance sheets are resulting in wet diapers, and screams for triggering the nuclear option: i.e. nationalising global banks! This is advocated by Greenspan (who, with Bush Jr., is more responsible than bankers for the mess we are in), senior members of the US, UK and EU parliaments, as well as ‘public choice’ academics. Based on experience with nationalised banks around the world over time, and the UK’s experience since August 2007, that proposition is insane; even if it is advocated as temporary, for nursing the banking system through intensive care!”

Tuesday, February 24, 2009

Pratap Bhanu Mehta is considered to be a moderate in debate but whenever the topic of education is chosen, it is utterly the diversity which he likes in all fronts, what is in it. See the below few para from his recent column in Indian Express.

“in American universities you come up for tenure after six to eight years. Amartya Sen was appointed professor at a relatively young age. It couldn’t happen under these guidelines. You have to have ten publications. What information might this magical number “ten” give you?

Then there is the revelation about the ambition we have about India’s academia. If you publish a book or an article in an international journal or press you get double the points than if you publish in India. Admittedly there is a problem in India. In many fields we do not have internationally recognised refereed journals or publishers. Benchmarking to global standards is not always a bad thing. But the trouble is that this is being done indiscriminately. “International” is not being defined at all: why should a fifth-rate Autstralian journal necessarily get more points than an Indian publication? Are we saying that in the long run the only authoritative forms of knowledge we will accept are ones that are validated abroad? We don’t want to be world leaders. Instead of asking the real question, how do we get professional standards up in India, we are simply telling our faculty: don’t care about the production of knowledge in India, it will be valued less. In every other field reform means building India’s strength and brand; in education it means outsourcing to the West.

But the UGC would do well not to supplant itself in the place of universities. These guidelines need to be corrected by more than just tinkering. They are indicative of fundamental pathologies of Indian higher education. The most insidious one is this. Higher education is fundamentally about judgment and the cultivation of reason, not formulaic control. Even more insidious is the enervating of spirit these regulations represent. The UGC now proposes to insist not just that faculty teach, administer, do research, etc. In addition, they spend a designated number of hours on campus. Given the fact that most universities do not even have minimally dignified facilities for teachers, this requirement is a joke”.

Earlier another economist Bibek Debroy wrote in the same news paper in the same column that lamented the homocommissions foolproof.

“This is Hydra with its many heads and these should be lopped off and burnt. That’s the key, not increasing public expenditure on education. Competition is the key, with appropriate regulation. Here is the NKC on regulation: “There is a clear need to establish an Independent Regulatory Authority for Higher Education (IRAHE)... Entry through legislation alone, as at present, is a formidable barrier. The consequence is a steady increase in the average size of existing universities with a steady deterioration in their quality. The absence of competition only compounds problems. Second, as we seek to expand the higher education system, entry norms will be needed for private institutions and public-private partnerships... And there are extensive rules after entry, as the UGC seeks to regulate almost every aspect of an institution from fees to curriculum. The system is also based on patently irrational principles... In higher education, regulators perform five functions: (1) entry: licence to grant degrees; (2) accreditation: quality benchmarking; (3) disbursement of public funds; (4) access, fees or affirmative action; (5) licence: to practice profession. India is perhaps the only country in the world where regulation in 4 of the 5 functions is carried out by one entity, that is, the UGC. The purpose of creating an IRAHE is to separate these functions.”

Strong words and compelling arguments. The NKC submitted more than 250 recommendations. Most have gone for a six, including dilution of governance in the Central Universities Bill. The HRD ministry isn’t Hydra’s immortal head. It too needs to be sliced off and burnt”.

Yes Proper Property is the solution to prevent future financial crisis saysPeruvian economist Hernando de Soto in the newsweek article.

See some of those interesting discussion.

“This poisonous paper is scaring off potential creditors and investors who lack the legal means to understand what this paper signifies, how much there is, who has it and who might be a bad risk. Finally, policymakers in the White House seem to be coming to grips with the real enemy: the debasement of the legal financial documents that represent value, allow it to be transferred and signal risk.

You are able to hold, transfer, assess and certify the value of such assets only through documents that have been legally authenticated by a global system of rules, procedures and standards. Ensuring that the relationship between those documents and each of the independent assets they represent is never debased requires a formidable system of legal property rights. That system produces the trust that allows credit and capital to flow and markets to work.

In recent years, governments have debased paper by carelessly allowing into the market a biblical flood of financial instruments derived from bad mortgages nominally valued at some $600 trillion or more—twice as much as all the rest of the world's legal paper, whether it represents cash, traditional financial assets, or property, tangible or intangible.

The main challenge for Obama and Geithner is to restore trust in the prime vehicle of credit—not money, which we know how to control, but paper, which we clearly don't. The overwhelming amount of available credit is made up of proprietary paper, such as mortgages, bonds and derivatives, all of which is not money per se but has some of the financial attributes of money—what economists used to call "moneyness." To prevent the debasement of paper and adequately infer its value, the Obama administration must turn to well-tested rules ensuring paper's credibility.

Moreover, every financial deal must be tethered to the real performance of the originating asset, ensuring that the amount of debt secured on the basis of assets does not become dangerously "out of scale" with those assets underlying the debt—the most prominent cause of a recession, according to the economist John Kenneth Galbraith. And assets can continue to be leveraged and repackaged—but only to improve the value of the original asset. Finally, it must be recognized that clarity and precision are indispensable for creating credit and capital through paper.

Still another challenge to Obama is that many of those involved in resolving the crisis now claim that it is virtually impossible to identify and value all the toxic paper now on the financial institutions' books. Yet in the past U.S. and European lawyers and bureaucrats have proved brilliant at sorting out toxic paper whether it referred to bad debt, confusing claims or opaque legislation. In doing so, they have untangled claims after the California gold rush, picked up the pieces of Europe's crumbling precapitalist order, converted Japan's feudal enclaves into a market economy after World War II and reunified Germany after the fall of the Berlin Wall. That's the process of capitalism: continuous detoxification. And we're hard at it today, too, in developing countries, searching for toxic paper in our shadow econ-omies—informal titles, licenses, contracts, laundered money and identity documents —in an effort to bring their people into the mainstream”.

There is interesting Peruvian economist Hernando de Sotointerview in the Newsweek. The following are some of those:

“How does this relate to the financial crisis?

The enormous amount of derivatives that had poured into the market—there are close to $600 trillion of these papers around—are also not recorded in a global or centralized manner, or in a manner that allows you to begin to quantify them. [Former SEC Chairman Christopher] Cox thought that maybe the toxic part of all of these assets was $1 trillion to $2 trillion. [Treasury Secretary Timothy] Geithner told us there's maybe $3 trillion or $4 trillion. Nobody really knows, so in a way [they've created an] informal or shadow economy. This unidentified paper is the source of uncertainty and the credit contraction.

Has the subprime mortgage market become a shadow economy?

Subprime mortgages are not a shadow economy. But what happened is that a lot of these mortgages got repackaged into securities. Then they became collateralized debt obligations and some of these mortgages were sliced and diced and put into tranches. When some of these mortgages went sour and people started defaulting on their payments, then of course a lot of the securities tied to them also started defaulting. But when you try and trace who's ultimately responsible for the value of that paper, you couldn't find it. That's the part of the market that has become the shadow.

So basically ill-defined property rights in the subprime mortgage sector caused a meltdown. Does the same happen in the developing world?

Yes. That shadow hopefully is a temporary condition in the United States and in Western Europe. And it might pass in a year or 10 years, but it will pass. That passing condition that's occurring now in developed countries, that's a chronic condition in developing countries. We're always chronically in credit crunches—because you don't know who owns what, nobody dares lend to somebody else. Bringing the law to emerging markets is possibly the most important measure that can be taken to help these countries become rich. Look at the Iranians, look at the North Koreans—they're building nuclear plants. Look at the computer—they're being built in northern India. The issue isn't the expansion of technology. We can all get it, borrow it, buy it or steal it. The issue is how do you get a legal system that allows people to cooperate so as to create more complex systems and objects.

So at this point, a Wall Street banker in a $10,000 suit is encountering basically the same problem that Nairobi slum dwellers have had to deal with for decades or more.

Absolutely. The difference, however, is that in Nairobi they are still struggling to understand that a property system is the best way that they can do things. In the United States, every piece of land, every house, every automobile, every airplane, every manuscript for a film, every patent is written up and recorded and described. There's only one thing in the United States which is not recorded in such a way and that's derivatives. We're only talking about 7 percent of the subprime market being in default, yet it is causing a major contraction in your economy. You're not getting your credit flowing because you don't know what is where and who it belongs to.

What's the answer? How do we assign "property rights" to derivatives?

The banks and the holders of all of these instruments have got to report them in such a way that your government and the public knows who owns what and where. Once the light shines, you will know who's solvent, who's insolvent. You'll be able to have a clean debate as to who to help and who not to help. And you're going to have a much better idea of the consequences of not helping or helping. Right now you're talking about all of those issues, but you still don't have the facts. So the first thing is to have the law require those people who own these things to fess up”.

Friday, February 20, 2009

Bruce Einhornwrites in the BusinessWeek “Then Murthy provided some of the bad numbers: “According to the academic ranking of world universities for 2007, India had just two universities in the top 500, in fact there was no university of India in the top 300 best universities in the world while Japan had thirty-four, China eighteen, South Korea seven, and had Brazil four. And India just 2.” Moreover, “India ranks a lowly 119th among 149 countries ranked in the citations index. Imagine 119th rank among 149 countries.” One more: “India filed 363 patents in 2004, the latest year for which I have the figure - compared to 84,271 filed by the USA, 35,350 by Japan, and 5,938 by tiny Taiwan.”

We thanks ourselves and to others for the commendable job done by the Government of India and its policy makers to make India on the world edge in education ,of course the science..

“Aggravating the situation is the fact that teachers often come late and leave early. Even when they are present, they are not necessarily teaching. In half of the sample schools, there was no teaching activity at all when the investigators arrived – in 1996 as well as in 2006.

Even in the active classrooms, pupil achievements were very poor. Teaching methods are dominated by mindless rote learning, for example, chanting endless mathematical tables or reciting without comprehension. It is therefore not surprising that children learn little in most schools. For instance, we found that barely half of the children in Classes 4 and 5 could do single digit multiplication, or a simple division by 5”.

Since the authors are determined socialist, so there is no surprise to heard the like this:

“The quality of private schools varies a great deal, and the ’cheaper’ ones (those that are accessible to poor families) are not very different from government schools. Their success in attracting children is not always a reflection of better teaching standards; some of them also take advantage of the ignorance of parents, for example, with misleading claims of being "English medium." Further, a privatised schooling system is inherently inequitable, as schooling opportunities depend on one’s ability to pay. It also puts girls at a disadvantage: boys accounted for 74 per cent of all children enrolled in private schools in the 2006 survey (compared with 51 per cent of children enrolled in government schools). Private schooling therefore defeats one of the main purposes of ’universal elementary education’ – breaking the old barriers of class, caste, and gender in Indian society.”

Apollo HospitalsChairman, Prathap C Reddy, says“I faced bureaucratic heat as early as the registration of Apollo Health Services. The construction of the hospital in Chennai was stalled by the state's chief minister, MGR. Refusing to pay a price for urban land clearance, I turned to then Prime Minister Indira Gandhi, who wrote a strong letter to MGR seeking the reason for the delay. Meanwhile, Mrs Gandhi asked Andhra Pradesh chief minister T Anjiah to set aside land for Apollo in Hyderabad.

The bigger problem, however, was a 320% customs duty on import of medical equipment. Though Mrs Gandhi granted certain exemptions, I had to spend two days every week pushing for clearances. Hospitals at the time were ineligible for funding, but Pranab Mukherjee who was the finance minister then, allowed Apollo to borrow 50% from Indian banks and the rest as foreign currency, as a special case. It took about six months to receive clearance for an IPO. Today the Apollo group has three major projects at various stages of development.”

There is a quote in the ET article from Muhammad Yunus, 2006 Nobel Peace Prize awardee:

He said the “...poverty is an artificial creation. It doesn’t belong to human civilisation, and we can change that, we can make people come out of poverty (sic). The only thing we have to do is to redesign our institutions and policies.”

Further it is more opt to remember from his Nobel lecture that the “Poverty is created because we built our theoretical framework on assumptions which under-estimates human capacity, by designing concepts, which are too narrow (such as concept of business, credit- worthiness, entrepreneurship, employment) or developing institutions, which remain half-done (such as financial institutions, where poor are left out). Poverty is caused by the failure at the conceptual level, rather than any lack of capability on the part of people”.

Thursday, February 19, 2009

“Funding Fathersis a celebration of the unheralded achievements of great donors. For instance, the names ofKansas Cityphilanthropist William Volker (1859–1947) and his nephew Harold Luhnow (1895–1978) are forgotten. In part, that’s because they put a time limit on the life of the grant-making Volker Fund they established. Unlike a Ford Foundation or Pew Charitable Trust, which exist in perpetuity to support causes contrary to the donors who created them, the Volker Fund honored its donors’ intentions during their lifetimes. During its three decades of existence the Volker Fund achieved far more than William Volker could have imagined.

In aKansas Cityarchive Hoplin and Robinson located a scrap of paper datedMay 7, 1945, on which William Volker authorized a $2,000 grant request by Friedrich Hayek to defray the travel expenses of 17 Americans to the first Mont Pelerin Society meeting inSwitzerland. It was during the high tide of Keynesianism (and one day before Nazi Germany’s surrender) that Volker made it possible for American free-market economists and writers to meet their counterparts in war-tornEurope.

The $2,000 grant helped pay for economists Milton Friedman, Frank Knight, Ludwig von Mises, and George Stigler, writers Felix Morley, John Davenport, and Henry Hazlitt, and institution-builders Leonard Read of the Foundation for Economic Education and F. A. Harper, who would found the Institute for Humane Studies, to confer with like-minded Europeans about the fate of the postwar world. Hoplin and Robinson’s diligent research also uncovers that Volker subsequently provided teaching stipends for Hayek, Mises, Morley, and economist Murray Rothbard and sponsored lectures by Milton Friedman that would become his bookCapitalism and Freedom. One wonders what grants might have a comparable impact today.

Funding Fathersis a timely book because it reminds conservatives that while elections come and go, good ideas prevail”.

“Thanks to a Supreme Court ruling in 2002, the filing of assets data is mandatory by anyone contesting an election. In order to establish exactly who are India’s rich politicians, we undertook a study along with EmpoweringIndia.org, an initiative of the Liberty Institute led by Barun Mitra. It took three months of exhaustive research at the Election Commission and Rajya Sabha Secretariat by staffers Shyamlal Yadav and Sangram K. Parhi under the supervision of Managing Editor Shankkar Aiyar to list the richest politicians whose submissions are open to debate.

The filing of assets data is mandatory but not verified. Some legislators have shown an increase in wealth of over 500 per cent in four years. Yet, the statistics are revealing. Of the 215 Rajya Sabha members for which we have data, 105 are crorepatis. Of the 522 Lok Sabha members, 135 are crorepatis.

Members of legislative assemblies seem wealthier than many of the MPs. The top five MLAs across the 30 states are worth Rs 2,042 crore. Uttar Pradesh has the richest chief minister and 113 crorepati MLAs. One indication of how this money has been accumulated is that of 150 wealthiest MLAs, 59 don’t even have a PAN card! Our cover story looks at India’s richest politicians across various categories. A handful are legitimate businessmen, the rest only serve to reinforce the dubious nexus between power and money”.

Now pundits begin to recognize the mercy created by regulatory functions rather than blaming the “unfettered market” including Mr Nitin Desaiwho writes may be rightly so:

“John Taylor, the man who devised and gave his name to the rule for setting policy interest rates, posed three questions in a recent NBER paper*: What caused the financial crisis? What prolonged it? Why did it worsen so dramatically more than a year after it began? He concludes that specific government actions and interventions should be first on the list of answers to all three.

The policy failure that caused the crisis is the low interest rate regime in 2001-2006 which is the major factor behind the housing boom and bust. The US Fed Fund rate fell from around 2 per cent to 1 per cent by mid-2004 while the Taylor rule required it to rise to 4 per cent. Between June 2004 and June 2006 a drastic correction was attempted and the Fed Fund rate was raised by 425 basis points. This burst the housing bubble. A counterfactual simulation shows that if the Taylor rule had been followed, the amplitude of the housing cycle would have been greatly reduced and we may even have avoided the worst of the sub-prime crisis.

Some of these policy failures are a product of a change in regulatory culture that was ushered in by the Ayn Rand acolyte, Alan Greenspan. He believed that regulators should not try and correct asset price bubbles but only cope with the consequences when they burst. This is what led to the low interest regime after 2001 when the dot.com bubble burst”.

But one may ask why did he believe (or do his personal belief) when he is accountable to public interest and discharging his duties in Fed.

DAVID VON DREHLE / SPRINGFIELDwrites in the TIME that during the Lincoln President period“For the first time, the Federal Government taxed income, floated bonds on a large scale and issued paper currency. The national wealth — land — was leveraged to promote sweeping social, educational and technological initiatives. Some ideas didn't work as planned, like the Homestead Act. Others, like the Morrill Act to create land-grant colleges, worked brilliantly. Still others achieved their aims only at a cost of waste and graft, like the Transcontinental Railroad.”

TT Ram Mohan says"There is talk now, as in previous economic crises, of having to reinvent capitalism. What this generally means is that we need to redefine the roles of state and market. But there are people who think this is not enough. The time may also have come to remake key institutions of capitalism".

And C. Gopinath says"It is time we gave up all the terms like capitalism, socialism, free trade, privatisation, nationalisation, and so on. They carry too much baggage and mean different things to different people. Let's start afresh!"

Both are more or less similar line including their management profession. But what is the other alternative? after all these many “ism” prevail for a while. If they try...... actually they can’t without understanding history.

Shubhashis Gangopadhyaybites on Interim Budget but nothing new, the other issue is that he himself is part of the finance ministry advisory he could not persuade them to include all those hard core facts of present (UPA, of course the) "UPS" achievements during the last five years. But compliant “sound like items from a laundry list” “the budget speech needed to give the government’s reading of the current economic situation and its outlook for the next couple of years. Second, it could have talked about how the actions taken so far are going to work in the economy and, by when. Third, it could explain how the actions taken so far are sufficient to arrest any further deterioration in the economic health of the country. Fourth, it could have outlined its desired policies to get the economy back on track. Then, and, only then, could the Minister say that, however, we will desist from trying to implement any of the new policies since this is an interim budget and let this be our suggestion to whoever forms the next government. Instead, the speech went into a laundry list of what the government has done in the last five years!”

This year January may be ended with a new version of induced CRITISIM of Newspapers-MINTLIVE, BUSINESS-STANDARD etc. Now it seems to me that the February wanted to end with “conspicuous presence” of small screen revolution in India.

A veteran Sociologist Andre Beteilleargues like was holding a stock of CRITISM in full stomach for years. For instance see the below paras:

“Not all the information provided on television is of significant value. Much of it is trivial and ephemeral. The analysis provided is sometimes acute and incisive, but often it is empty and vacuous. There is a strain towards thepresentationof information in a striking and dramatic form. Much of what takes place in our public life is ordinary and humdrum, but with some effort even the most banal happenings can be given a portentous air. Television reporters and anchors habitually adopt a breathless manner, which even the most seasoned newspaper columnist orradiobroadcaster cannot easily simulate.

Doordarshan held the field by itself, there was very little entertainment, and the information was bland and stereotyped. This has changed with the entry of privatetelevisionchannelsinto the field. Even Doordarshan is now less dull and stodgy than it used to be. Our newsreaders do not have to be grim faced as in China or Russia, and the women among them do not have to cover their heads as in Iran and Pakistan. It is good to see greater variety in dress and deportment although, personally, one regrets the passing of the sari.

The line between entertainment and information is in any case never clear and, where there is acute competition to hold the viewer's attention, it is easily crossed. Leaving aside the embarrassment and anguish caused to individuals and households, matters of public security and institutional propriety tend to be given short shrift. Newsreaders and analysts know how to simulate both grief and concern, but this loses something in credibility when their presentation is regularly interrupted by commercialadvertisementsthat are anything but solemn or sorrowful.

What is worrying about private television is the cut-throat competition between rival channels. The competition affects the manner in which news is presented and, in the end, also its substance.It is natural that when an interesting or important story comes to light each channel should strive to be the first to present it to the public. It is also natural that it should wish to claim that its own story is exclusive. But such a claim serves mainly its own commercial interest rather than any identifiable public purpose.

Private television channels should not be blamed for seeking to augment their revenues, but they, on their side, should not cut too many corners. Nor should they be blamed for seeking credit for providing a useful service provided they do not make lofty moral claims about being the citizen's shield against the authorities. It should not be too difficult for the citizen to determine what they do in the public interest and what they do for profit and, further, to see that the two are not always convergent”.

Wednesday, February 18, 2009

Blackburn said something interesting in a recent interview in the Indian Express, Walk The Talk:

“Shekhar Gupta: And you're so happy when a student or a scholar comes up with something that improves on what you've done or that contradicts what you believe . That's achievement.

Elizabeth Blackburn:That's the most wonderful thing, that's an achievement and in science the idea is actually your hope is students are always better than you are . That's what you most hope for. Your biggest joy is when they are exceeding you and you know this is what science is about whereas other sort of walks of life if you…”

If anything changes in the Indian universities and institutions (teaching method and approach toward with students) particularly in the Departments of Economics will have at least some groundbreaking effect for the next generation.

T. C. A. Srinivasa-Raghavanasks how the causality function? And “f, say, the demand curve for something shifts upwards, how do you know which of the following caused it: an upward shift in per capita incomes, a change in tastes and preferences, or simply a generational change?

Economists, with their certitudes, often carry on as if they know for sure. The truth, however, is that there is simply no way of telling”.

There is news, the Janata Party president Dr Subramanian Swamy delivered the sixth Nani A. Palkhivala memorial lecture at SASTRAUniversity, Tamil Nadu on “Modern concepts of multi-dimensional Intelligence,”.

“Dr. Swamy said that mind was extremely crucial".

“One can be good at Physics and solve equations. But it is necessary to develop a mindset for looking at things in a right way. Other types of intelligence like cognitive intelligence, emotional intelligence, social intelligence, moral intelligence and spiritual intelligence are also necessary,” he said”.

Friday, February 13, 2009

It was one HT day where we were having good (hot) tea party among friends with some of our Economics Department PhD students. In the middle our discussion one of them said can you imagine how much of the Adam Smith’s Wealth of Nations ideas have been grasped through generation to generation and taught with lucid understanding of the ideas of Adam Smith point of view, and how much of his ideas have been taught in the class room of this world.

Obviously, the ideas are transformed through the man. And the similar story goes with the Origin of Species.

12 February (yesterday) was Darwin and Lincoln birthday; there are few comments, review on Darwin giant theory. Some relate with Marx theory, some relate with free market economics and some others.

First, free market economist Gary Northwrites “Two hundred years ago today, the sun rose over the English village of Shrewsbury. Susannah Darwin was about to give birth to her fifth child, Charles. Her husband Robert was a financier. Her father was a Wedgewood, of pottery fame. Times were not tough in the Darwin household.

The sun moved over the Atlantic, heading for Hardin County, Kentucky. Later in the day – the Darwins' day, anyway – it passed over the log cabin of Thomas and Nancy Lincoln, whose son Abraham had just been born. Times were always tough in the Lincoln household.

All in all, it was a memorable day, if not for the sun, then for the rest of us”.

Second, “evolution in the air”, under the sun, moon, above the earth and middle of the sky….Pramit Pal Chaudhuri says “Those who rage against capitalism argue that market economics hasn’t actually helped people, that it is inimical to progress. They lie. Other than a few nations floating on oil and populated with idle rich, all the wealthy nations of the world have got to the top of the greasy pole by accepting that greasy poles make economic sense. Almost all the poverty reduction of the past 20 years — and it has been unprecedented — has been because China and India began to rediscover the market.”

Third, Mukul Sharma says“it's like the optical illusion where the profiles of two silhouetted faces on two sides of a drawing form the outline of a white vase in the middle. Sometimes we see one aspect of it and sometimes the other. Darwin's predecessors and contemporaries were generally gazing only at the faces on the edge till Darwin pointed out the vase in the middle which was actually staring them in the eye all the time. Is it any wonder then that when Darwin's friend and colleague T H Huxley first read the Origin of Species in 1859 he was so dazzled by its obviousness that he said to himself: "How stupid not to have thought of it before!"”

Forth, Lalit Mohan says that “the Englishman lived in a wealthy home in Shrewsbury, but without any focus in life, leading his father to comment, “You will be a disgrace to yourself and all your family.” He left at 22 on a voyage to the Pacific on board HMS Beagle. Five years later he returned carrying inside his head a theory so revolutionary that he kept it right there for nearly two decades. On his voyage, Darwin meticulously studied the flora and fauna in the Galapagos and came to the conclusion that different species evolve continuously and those that adapt best to the changes in environment survive and dominate. That worried him. If all life evolved biologically then something was fundamentally wrong with what mankind, particularly the Christian world, perceived the origin of the human race to be.”

On the important of Darwin and Lincoln you have go another Indian economist blog here.

Thursday, February 12, 2009

Manish Sabharwalsays“The 25% reservation clause could easily be substituted with a well designed national education voucher plan that would create inclusiveness with the upsides of choice, transparency, competition, quality and capacity”.

Wednesday, February 11, 2009

Sharad Joshi says some history about the care, the congress, cement ….and is worth reading.

“One of the early disasters of Nehruvian socialist planning with emphasis on heavy industry was an over-production of cement. S. K. Patil, in his autobiography, gave a hilarious account of how the States and the local authorities were persuaded to go in for cement concrete roads in preference to tar roads.

In the early decades after Independence, India had only two or three models of cars, which were manufactured by families that were close to the Congress leadership. India became a country of poorly maintained cement concrete roads and ramshackle cars.

Since the interests of the car manufacturers and car owners were close to the heart of the rulers, the government followed, for long years, a policy of subsidising petrol and diesel. For the same reasons, cooking gas was also subsidised. The subsidies would have been politically expensive for the socialist pretensions of the rulers if kerosene, recognised as the poor man’s fuel, had been left to the free market forces”.

Thursday, February 5, 2009

“President Obama’s package of building a new energy architecture, healthcare, and infrastructure development is likely to increase domestic demand, but spillover to other parts of the world remains uncertain.”

“..government interventions are holding operations that restore production, employment, consumer spending, and business confidence. Only after households, businesses, and exports regain their position as drivers of economic growth will global demand be restored. During the interregnum countries having the wherewithal to model uncertainty are expected to best withstand the crisis”

Don’t forget to think of sixth pay commission funding for more stimulus packages……..to these babus and netas..

Wednesday, February 4, 2009

India’s“…caste encouraged the development of exceptional handicraft skills. Many Indian goods, from specific kinds of textile to hardened sword steels, could not be reproduced under the work conditions prevalent anywhere else in the world, at least before industrialization.

High levels of specialization also meant well-established systems of exchange—and to mobilize these, a widely developed facility with money use, a willingness to exchange goods for cash and long-distance credit networks of increasing sophistication. Kin and caste connections helped to establish relations of trust that were essential for these credit networks.

The mobility of India’s population —particularly of its specialized artisan communities and skilled agriculturalists—was another critical factor in the development of these exchange relations. Skilled people were a highly sought after social and commercial asset and regional states competed to attract them. Caste was also a factor here in facilitating mobility and preserving long-distance social ties.

…why many of the things that we have come to regard as “backward”—a high degree of human specialization in production, caste and family as the basis for commercial organization —continued to be important”.